Speaking to the BBC’s Andrew Marr programme Mr Osborne said: “We have set the budget for £42 billion for the construction costs. That includes, by the way, a big contingency.

“As we demonstrated with the Olympic Games, we can deliver these big projects actually sometimes under budget.”

He added: “I think we have got a good budget, which has got a very big contingency in it, we've set a budget.

"I'm passionate about this project because time and again, we have this debate in our country about how we're going to bring the gap between north and south together, about how we're going to make sure that our growth is not just based on the City of London.

"High Speed 2 is about changing the economic geography of this country, making sure the North and the Midlands benefit from the recovery as well."

Work on HS2 is due to begin in 2017, with connections to Manchester and Leeds completed by 2032.

Experts have warned that it will blight large tracts of the British countryside.

Alistair Darling, the former Labour Cabinet minister, last month withdrew support for the project and warned that it could lead to the rest of the UK’s rail network falling apart.

Labour has since placed a £50 billion cap on the cost HS2 and threatened to block the project if the bill spirals out of control.

Patrick McLoughlin, the Transport Secretary, is understood to be drafting a major speech in which he will portray HS2 as vital to Britain’s economic well-being.